Does the post-termination non-compete clause for Pearce Bespoke apply to owning stock in a competing company?
Pearce_Bespoke Franchise · 2025 FDDAnswer from 2025 FDD Document
Franchisee (and all Personal Guarantors and owners of all or part of Franchisee) will not, directly or indirectly, for a period of two (2) years after this Agreement expires or is terminated (except for a termination as a result of a Franchisor's breach), on their own account or as an employee, consultant, partner, officer, director, or shareholder of any other person, firm, entity, partnership or corporation, own, operate, lease, franchise, conduct, engage in, be connected with, have any interest in or assist any person or entity engaged in any resale of a mobile business not offered by Pearce Bespoke involving the purchase and/or sale of custom clothing and accessories located within the Franchised territory within a ten (10) mile radius of the thereof or any Pearce Bespoke Franchise. Franchisee expressly agrees that the two (2) year period and the ten (10) mile radius are the reasonable and necessary time and distance needed to protect Franchisor if this Agreement expires or is terminated for any reason.
Source: Item 22 — CONTRACTS (FDD page 39)
What This Means (2025 FDD)
According to Pearce Bespoke's 2025 Franchise Disclosure Document, the post-termination non-compete clause does address owning stock in a competing company. After the Franchise Agreement expires or is terminated, the franchisee (and all personal guarantors and owners) cannot, for two years, act as an employee, agent, consultant, partner, officer, director, or shareholder of any other person, firm, entity, partnership or corporation involved in a resale of a mobile business not offered by Pearce Bespoke. This restriction applies to businesses involving the purchase and/or sale of custom clothing and accessories within a ten-mile radius of the franchised territory or any Pearce Bespoke Franchise.
This means that a former Pearce Bespoke franchisee is restricted from owning stock in a competing business that resells mobile custom clothing and accessories within the specified geographic area and time frame. The non-compete aims to prevent franchisees from using the knowledge and experience gained while operating a Pearce Bespoke franchise to directly benefit a competing business, even in a passive role as a shareholder.
The Franchise Agreement specifies that the franchisee acknowledges the two-year period and ten-mile radius are reasonable and necessary to protect Pearce Bespoke if the agreement expires or is terminated. Furthermore, the non-compete period can be extended if the franchisee breaches the non-compete provisions. Pearce Bespoke can seek injunctive relief, meaning a court order to stop the franchisee from violating the non-compete agreement, in addition to any other legal remedies available.
It is important for prospective franchisees to understand the scope and limitations of the non-compete clause before entering into a Franchise Agreement with Pearce Bespoke. They should consider how these restrictions might affect their future business opportunities if they decide to leave the franchise system.